CASH FLOW ANALYSIS

A traditional Cash Flow Statement will show you an overall financial picture of your business. During a specified period; it answers the questions of: Where did the money come from? What was it used for, and what changes occurred if any, in the cash balances? Although many business owners will spend substantial amount of time evaluating income records to know their cash balances to the penny: this alone fails to contemplate other information available that might dramatically impact, pertinent operational and strategic issues. A careful analysis of long-term issues would include an evaluation of the business's current results versus its annual forecast. It is also important to evaluate cash balances to review anticipated dates of you account collections, payment of ordinary debt, accounts payable scheduling, fixed asset purchases, and prospective or current leases.

In light of this information, the business owner is better positioned to strategically plan for any future concerns as it relates to the business' cash flow.   Failure to consider all of these issues will result in a perpetual influx of poor cash decisions. Business owners can not afford to always be retroactive as the world around them is moving forward; one must be proactive, placing a continual effort on planning ahead.  It's fairly simple to create your business' Cash Forecast. Preferably monthly, write down what you expect in for the month? ---what has to be paid out?; ask yourself how does the answer to these two primary questions reflect a future goal or plan for your business. Physically writing out your cash forecast will give insight into the future and will prove invaluable when making monetary decisions. One of the best insurance policies in the cash management are lines of credit from your financial institution. Lines of credits provide ample margins by leaving extra money available for business emergencies or rainy days. Banks are generally eager to open and maintain a line of a credit for a business that has peak cash needs while continuing to operate at a profitable level. However for many new businesses this may not be an option, so never underestimate the power of "saving in a cookie jar"...or opening savings account with your bank J

Don't be afraid to ask for help. Your business Accountant might be able to provide clarity to your forecasting plan by tweaking it; ultimately to bring the needed strength, wisdom and formatting to turn your good idea into an even more potent and powerful idea. Take the time necessary to nurture your ideal business; never stop planning and never stop setting attainable goals. Many business owners make the mistake of only focusing on the BIG picture. We urge you to also focus on the small things...it's the little things that that separate business success from business failure.

By working with us you will learn how to better plan when making decisions affecting your company's cash balances, feel free to contact us with the questions you may have.